Bankruptcy may help give relief on a solar panel loan. How a solar panel loan is treated depends on the type of bankruptcy filed. Most solar panel loan contracts include language that the lender has a lien against the solar system equipment. Each case differs, and the financing documents also impact the way bankruptcy can help. In most cases, the solar panel lender files a document with the Texas Secretary of State and in the county land records called a UCC. This gives notice to all that the lender has a lien against the solar panels. In some cases, a “fixture lien” may be created which can cloud the title to your home.
The following are possible options where the contract gives the lender a lien against the solar panels only:
How Chapter 7 bankruptcy may help reduce or eliminate a solar panel loan
Option 1: Redeem the solar panel system – you pay the value of the solar panel system. This is done through filing a motion to redeem with proof of the value of your used solar panel system. Value may be proved through various sources, such as researching used solar panels on ebay. You can also hire an expert to prove value but this can be expensive. If the lender does not object to your motion, the Court enters an Order requiring you to pay the value within a specific time period and ordering release of the lien. The value of a used solar panel system is normally substantially less than the loan.
Option 2: Surrender the solar panels – you stop paying the loan and give notice through the bankruptcy that you no longer want the solar panels. You must permit the solar panel lender to repossess the solar panels. The problem is that solar panel lenders are not repossessing the solar panels and the lien in the solar panels continues. Especially with a roof mounted system, this may cloud the title to your home. This could mean that when you sell your home (or possibly even refinance), the solar panel loan has to be paid in full before a title company will clear the title. The solar panel lender may take steps to stop the functioning of the solar panel system.
How Chapter 13 bankruptcy may help reduce or eliminate a solar panel loan
Option 1: Pay the value of the solar panels – if you financed the solar panels at least 12 months before filing bankruptcy, you may pay the value of the solar panels as part of your chapter 13 bankruptcy plan. For example, if the solar panels are valued at $1,000, you pay $1,000 with interest over the term of your chapter 13 plan (3-5 years). When you complete the chapter 13 bankruptcy, the lien is released and any unpaid portion of the loan is forgiven (discharged).
Option 2: Surrender the solar panels – similar to chapter 7 bankruptcy, your plan provides for you to return the solar panels and not pay anything on the loan. Again, if the solar panel lender does not repossess the system, this creates a problem. When you complete the bankruptcy, you may request a Court order giving the lender a deadline to repossess and release the lien.
Let a qualified, experienced bankruptcy attorney review your case to determine if bankruptcy is the best option for you. Reach out today for a free consultation.